TWC TWC's first-quarter outlook is rosier following its high-profile battle with CBS. Photo: Reuters

Time Warner Cable Inc. (NYSE:TWC), the country’s No. 2 cable provider behind Comcast Corp. (NASDAQ:CMCSA), on Thursday is expected to report higher first-quarter earnings on slightly higher revenue, following months of aggressive promotional offers meant to boost its shrinking subscriber base and improve its per-subscriber revenue.

The cable and Internet provider, which is based in New York, is expected to show net income of $478 million, up from $423 million, for the same period last year. Earnings per share are forecast to rise to $1.68 per share from $1.41 per share a year ago, analysts polled by Thomson Reuters predict. Revenue should increase 3 percent, to $5.64 billion, up from $5.48 billion, a year ago.

Time Warner Cable will report results on Thursday before the market opens. A conference call is scheduled for 8:30 a.m. ET.

The company's outlook is rosy, given a tumultuous 2013, which was marred by subscription losses and a high-profile battle over retransmission fees with CBS Corporation (NYSE:CBS). That dispute resulted in a month-long blackout of the network. Time Warner Cable lost 215,000 customers in the three months ended Dec. 31, Bloomberg reported.   

Time Warner Cable's narrative changed dramatically in February, when it announced plans to merge with Comcast, the nation's largest pay-TV provider, in an all-stock deal then valued at $45.2 billion. Analysts are describing the deal as a “friendly takeover.” The combined company will gain control of about one-third of the entire U.S. pay-TV market.

Initially, the news sparked investor concern about regulatory hurdles and a possible public backlash, particularly considering Comcast’s controversial 2011 merger with NBCUniversal, which faced fierce opposition from consumer groups and some federal regulators. Although Time Warner Cable shares jumped 6.8 percent on news of its pending merger, shares fell short of the $158.82 per-share value that its Philadelphia rival had offered, possibly indicating investors are concerned that the deal can clear regulatory hurdles.

At a Senate Judiciary Committee hearing in April -- which marked the beginning of the regulatory process -- opponents came out swinging, with many expressing concern that the merged entity would become an effective cable-industry “monopsony,” a buyer with enough power to push down the price it pays for programming, thereby squelching emerging content creators like Netflix Inc. (NASDAQ:NFLX).

Analysts are somewhat more optimistic. ISI's Vikash Harlalka wrote in an April 15 research note that if investors are planning on buying TWC shares, now is the time. “The deal spread with Comcast remains tight, suggesting the market is confident in the merger getting approved,” Harlalka wrote. “We prefer playing the transaction by buying TWC, as you get the assets at a 4 percent discount.”

Macquarie Capital analyst Amy Yong wrote in a March 4 research note that regulatory scrutiny could delay the merger until early 2015. In the meantime, Yong noted that Time Warner Cable is doing the right things by focusing on improved products like TWC Maxx, a service to increase bandwidth, and a new TWC app for the Roku streaming player.

She expects Time Warner Cable’s average revenue per user (ARPU) to rise 3.6 percent in the first quarter. “In the interim, it’s business as usual,” Yong wrote. “Time Warner management has a path to revitalize the business with better service, next-gen products like Roku and Samsung Smart TVs, and a market-by-market approach in its rollout of TWC Maxx.”

The wait-and-see approach appears to be the consensus. Out of 26 analysts polled by Thomson Reuters, 14 rated Time Warner Cable stock Hold. Time Warner Cable shares on Tuesday rose $1.83, or less than 1 percent, to $138.43.

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